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TMI Blog2024 (11) TMI 199X X X X Extracts X X X X X X X X Extracts X X X X ..... n question in the year 2018, cannot be sustained.' Considering the above decision and the facts of the case, it is an undisputed fact of the case that the petitioner bank had created a prior charge in the year 2011 as against the charge created by the State in the year 2018. Therefore, the petitioner-Bank will have a prior charge over the property in question which is sold in auction in favour of petitioner no. 2 and accordingly, the impugned orders dated 26.09.2018 and 07.09.2019 are hereby quashed and set aside - petition allowed. - HONOURABLE MR. JUSTICE BHARGAV D. KARIA AND HONOURABLE MR. JUSTICE D.N.RAY Appearance : For the Petitioner(s) No. 1,2: Mr P S Datta (11324). For the Respondent(s) No. 1 : Advance Copy Served To Government Pleader/PP. For the Respondent(s) No. 1,2,4 : Notice Served By DS. For the Respondent(s) No. 3: Notice Unserved. ORAL ORDER (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) 1. Heard learned advocate Mr. S.P. Majmudar for learned advocate Mr. P.S. Datta for the petitioners and learned Assistant Government Pleader Ms. Shrunjal Shah for the respondent-State. 2. By this petition under Articles 226 and 227 of the Constitution of India, the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1-Bank in favour of the petitioner No. 2 could be free from all encumbrances as far as the charge of the respondent-State created pursuant to the aforesaid order is concerned. 5. Learned advocate Mr. Majmudar placed reliance on the decision of this Court in case of Partners of Siddheshwar Tax Fab Ors. Versus State Of Gujarat Ors rendered in Special Civil Application No. 2527/2023 on 26.07.2024 to submit that the petitioner No. 1-Bank will have prior charge over the outstanding dues of the State and accordingly, the impugned orders dated 26.09.2018 and 07.09.2019 are required to be quashed and set aside and consequently, Entry Nos. 1412 as well as 1452 mutated in the revenue record are also required to be deleted. 6. On the other hand, learned AGP Ms. Shrunjal Shah could not controvert the facts about prior charge created by the petitioner No. 1 Bank in the year 2011 vis-a-vis charge created by the respondent-State in the year 2018 over the property which is sold in auction by the petitioner No. 1-Bank in favour of petitioner No. 2. 7. This Court in the aforesaid decision in case of Partners Of Siddheshwar Tax Fab Ors. Versus State Of Gujarat Ors (supra) has held as under: 32. In su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Apex Court has held as under: 27. Mr. Tushar Mehta, learned Solicitor General of India appearing on behalf of the Appellant with Mr. K.M. Nataraj, Additional Solicitor General of India and Ms. Aastha Mehta, learned Advocate, referred to Sections 3 (30) and 3 (31) of the IBC, set out herein below :- Section 3 (30) and 3 (31) of the Code read: 3 (30) secured creditor means a creditor in favour of whom security interest is created; 3 (31) security interest means right, title or interest or a claim to property, created in favour of, or provided for a secured creditor by a transaction which secures payment or performance of an obligation and includes mortgage, charge, hypothecation, assignment and encumbrance or any other agreement or arrangement securing payment or performance of any obligation of any person: Provided that security interest shall not include a performance guarantee; 28. The learned Solicitor General of India submitted that a reading of Sections 3 (30) and 3 (31) of the IBC makes it clear that the finding of the NCLAT that the State is not a secured creditor is erroneous and contrary to the clear definition of secured creditor under the IBC. 29. As argued by the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ental Authority. 58. We are constrained to hold that the Appellate Authority (NCLAT) and the Adjudicating Authority erred in law in rejecting the application/appeal of the appellant. As observed above, delay in filing a claim cannot be the sole ground for rejecting the claim. 35. From the above observations of the Hon ble Apex Court, it is clear that the Apex Court has considered the provisions of Section 53 of the IBC vis-a-vis Section 48 of the VAT Act and has come to the conclusion that Section 53 of the IBC does not override the provisions of Section 48 of the VAT Act and outstanding dues of the State Act as per the provisions of Section 48 of the VAT Act would be at pari passu with the dues of the secured creditor as provided under Section 53 (1) (d) (2) as stated in para no. 56 extracted herein above. This decision of the Apex Court was referred subsequently in case of Paschimanchal Vidyut Vitran Nigam Limited Vs. Raman Ispat Private Limited and Others reported in (2023) 10 SCC 60 while considering the waterfall mechanism as envisaged in Section 53 of the IBC Act, wherein it was observed as under: 52. PVVNL had relied upon the decision Rainbow Papers (supra). In that case, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of claims of various classes of creditors. The careful design of Section 53 locates amounts payable to secured creditors and workmen at the second place, after the costs and expenses of the liquidator payable during the liquidation proceedings. However, the dues payable to the government are placed much below those of secured creditors and even unsecured and operational creditors. This design was either not brought to the notice of the court in Rainbow Papers (supra) or was missed altogether. In any event, the judgment has not taken note of the provisions of the IBC which treat the dues payable to secured creditors at a higher footing than dues payable to Central or State Government. 54. The Gujarat Value Added Tax Act, 2003 no doubt creates a charge in respect of amounts due and payable or arrears. It would be possible to hold [in the absence of a specific enumeration of government dues as in the present case, in Section 53 (1) (e)] that the State is to be treated as a secured creditor . However, the separate and distinct treatment of amounts payable to secured creditor on the one hand, and dues payable to the government on the other clearly signifies Parliament s intention to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve the power to initiate recovery of dues by means of sale/confiscation, as provided under the Customs Act. 56.2. After such assessment, the respondent authority has to submit its claims (concerning customs dues/ operational debt) in terms of the procedure laid down, in strict compliance of the time periods prescribed under the IBC, before the adjudicating authority. 56.3. In any case, the IRP/RP/liquidator can immediately secure goods from the respondent authority to be dealt with appropriately, in terms of the IBC. 57. Similarly, in Duncans Industries Ltd. v. AJ Agrochem, Section 16G of the Tea Act, 1953 which required prior consent of the Central Government (for initiation of winding up proceedings) was held to be overridden by the IBC. In a similar manner, it is held that Section 238 of the IBC overrides the provisions of the Electricity Act, 2003 despite the latter containing two specific provisions which open with nonobstante clauses (i.e., Section 173 and 174). The position of law with respect to primacy of the IBC, is identical with the position discussed in Sundaresh Bhatt and Duncan Industries (supra) [refer also: Innoventive Industries (supra), CIT v. Monnet Ispat Energy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in (1972) 3 SCC 196 which is followed in the decision of the Dena Bank (Supra) and the law laid down is that preferential right of the Crown to recover the debt over the creditors is limited to the class of unsecured creditors and the common law of England or the principles of equity and good conscience would not allow the Crown to have preferential right for recovery of debt over the mortgagee or pledge of goods of secured creditors. 39. In view of the above settle legal position, the charge in respect of the property in question created for sales tax dues or VAT dues is of no avail and has no efficacy in law in view of the provisions of SARFAESI Act and the RDB Act. The property in question was sold by respondent no.6-Bank under the provisions of SARFAESI Act and the petitioners were successful purchasers and the sale certificate is issued and sale deed is also executed by which the petitioners have become absolute owners of the property and therefore considering the existing position of law, the charge created by the respondent State over the property in question in the year 2018, cannot be sustained and is accordingly quashed and set aside and as a consequence the mutation en ..... X X X X Extracts X X X X X X X X Extracts X X X X
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